Business in Thailand
A guide to starting your own company
Thailand’s continuous economic progress can be attributed to the presence of sufficient infrastructure and an efficient work force, backed by strong support from the government. If you are in Samui and would like to start your own business, it is advisable to acquire legal assistance from an expert lawyer to deal with all the legalities entailed by this endeavor.
Setting up your own business in Thailand entails following certain legal precedents and could take several weeks. Take the burden out of this process by having a trusted lawyer communicate in your behalf. Having the best legal counsel assures that you avoid any unnecessary oversight and delays.
Listed below for your reference are the different Business Structures, and the steps necessary to forming a company.
TYPES OF BUSINESS STRUCTURES:
Thai and Western concepts of partnership are broadly similar. Thailand provides for three general types of partnerships: Unregistered ordinary partnerships, Registered ordinary partnerships and Limited partnerships.
There are two types of limited companies, i.e., private or closely held companies, and public companies. The first is governed by the Civil and Commercial Code, the second by the Public Company Act.
Private Limited Companies in Thailand have basic characteristics similar to those of Western corporations. A private limited company is formed through a process which leads to the registration of a Memorandum of Association (Articles of Incorporation) and Articles of Association (By-laws), as its constitutive documents.
A minimum of seven shareholders is required at all times. A private limited company may be wholly owned by aliens. However, in those activities reserved for Thai nationals, aliens’ participation is generally allowed up to a maximum of 49 percent.The registration fee for a private limited company is 5,500 baht per million baht of capital.
Public Limited Companies registered in Thailand may, subject to compliance with the prospectus, approval, and other requirements, offer shares, debentures and warrants to the public and may apply to have their securities listed on the Stock Exchange of Thailand (SET).
A minimum of 15 promoters is required for the formation and registration of the memorandum of association of a public limited company, and the promoters must hold their shares for a minimum of two years before they can be transferred. The Board of Directors of a public limited company must have a minimum of five members, at least half of Them are Thai nationals. The registration fee is 2,000 baht per million baht of capital for a public limited company.
A joint venture may be described in accordance with general practice as a group of persons (natural and/or juristic) entering into an agreement in order to carry on a business together. It has not yet been recognized as a legal entity under the Civil and Commercial Code. However, income from the joint venture is subject to corporate taxation under the Revenue Code, which classifies it as a single entity.
A representative office is limited in engaging in non-profit activities. In order to form a representative office, at least one of the following purposes would need to be sought for the purposes of limited “non-trading” activities:
- The business is to search for the source of goods or services in Thailand for the headquarters overseas
- To check the quality and quantity of the product ordered by the headquarters overseas
- To give advices to the headquarters about the goods to order
- To supply the information of the headquarters’ products to the customers in Thailand
- To report the economic movement in Thailand to the headquarters
HOW TO FORM A COMPANY:
STEP 1: CORPORATE NAME RESERVATION
The name to be reserved must not be the same or close to that of other companies. Certain names are not allowed and therefore the name reservation guidelines of the Business Development Office in the Ministry of Commerce should be observed. The approved corporate nme is valid for 30 days. No extension is allowed.
STEP 2: FILING OF MEMORANDUM OF ASSOCIATION
A Memorandum of Association to be filed with the Business Development Office must include the name of the company that has been successfully reserved, the province where the company will be located, its business objectives, the capital to be registered, and the names of the seven promoters.
The capital information must include the number of shares and the par value. At the formation step, the authorized capital, although partly paid, must all be issued.Although there are no minimum capital requirements, the amount of the capital should be respectable enough and adequate for the intended business operation.
STEP 3: CONVENE A STATUTORY MEETING
Once the share structure has been defined, a statutory meeting is called during which the articles of incorporation and bylaws are approved, the Board of Directors is elected and an auditor appointed. A minimum of 25 percent of the par value of each subscribed share must be paid.
STEP 4: REGISTRATION
Within three months of the date of the Statutory Meeting, the directors must submit the application to establish the company. Company registration fees are 500 baht per 100,000 baht of registered capital. The minimum fee is 5,000 baht; the maximum is 250,000 baht.
STEP 5: TAX REGISTRATION
Businesses liable for income tax must obtain a tax I.D. card and number for the company from the Revenue Department within 60 days of incorporation or the start of operations. Business operators earning more than 600,000 baht per annum must register for VAT within 30 days of the date they reach 600,000 baht in sales.
Firms must keep books and follow accounting procedures specified in the Civil and Commercial Code, the Revenue Code and the Accounts Act. Documents may be prepared in any language, provided that a Thai translation is attached. All accounting entries should be written in ink, typewritten, or printed.
Specifically, Section 1206 of the Civil and Commercial Code provides rules on the accounts that should be maintained as follows :
The directors must cause true accounts to be kept :
- Of the sums received and expended by the company and of the matters in respect of which each receipt or expenditure takes place.
- Of the assets and liabilities of the company.
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